September 2014 - WiseDollar

Archive for September 2014

Should You Be Afraid of Churning Credit Cards?

September 29, 2014 Wise Dollar Credit 16 comments

Churning?credit cards is something people seem to either love or want to avoid at all costs. I get the apprehension, on many levels, as it?s playing with a tool that if used unwisely can lead to overspending and potentially debt. That makes total sense.

However, for some there is a genuine fear of credit card churning. My wife has had several conversations lately with clients of ours who have expressed fear, or at the very least considerable apprehension, of what might happen to them if they dipped their toes in the waters of churning credit cards. In one case, my wife explained how to use one or two credit cards to fund an expensive trip.

Instead of being excited, her friend reacted with fear, skepticism and hesitation around the entire topic of using a credit card. My wife left the conversation sensing that her friend had a somewhat irrational view of credit cards ? which is another issue altogether really. Her conversations got me thinking that it would be interesting to discuss fear and how it relates to credit cards.

Fear of Hurting Your Credit Score

The first thing mentioned by each of these individuals my wife had conversations with was fear; specifically, fear that even using credit cards would hurt their credit score. That fear makes sense, on one level, but is largely an invalid point driven by a lack of knowledge about how a credit score is determined. Each time you apply for a credit card, you generally see anywhere from a two to a five point impact on your credit score. Personally speaking, I have churned about 10-12 cards over the past year or so and my score is still in the 790-800+ range when I check it on Credit Karma. Since anything over 720 is considered good, I?m pretty happy with that.

One of the keys to remember when looking to churn credit cards is to space out your applications. Most will say to space out applications at least once every three months to as far as four to six months to play it safe. I personally go with the fourish month method, applying for multiple cards on the same day and that seems to work well for me. The point is to space them out and apply wisely to have a minimal impact on your credit score. Do this and you should be fine.

The other thing to remember is the importance of building credit. Two of the individuals my wife spoke with didn?t have any credit cards. While they shouldn’t jump head first into churning credit cards, they do need to build credit from nothing?and thus likely should get at least one credit card so they can begin to build that score. However, that?s really a separate issue altogether.

Fear of Getting Into Debt

Another fear I hear quite commonly is that churning credit cards will lead to getting into debt. I will say that if you?re afraid that churning credit cards will tempt you to overspend and get into debt as a result then no free trip is worth it ? plain and simple. Some might argue this, but I would say this is a valid concern. That is especially the case if you have a history of struggling with debt. In that instance, you need to do what?s best for you.

Maybe it means just getting one card, using it wisely and using it as a means to build your credit. Again, you need to do what?s best for you and your situation. With balance using a credit card can be fine, but you need to be able to sleep at night and if worries about churning keep you up, you should probably avoid it altogether.

Churning Credit Cards Can Be Rewarding

As you can likely tell, I am pro credit card churning as long as it’s done wisely. :-)?We have used it to fund several trips over the past year or two and have plans to do even bigger and better ones in the near future. Most of these trips would?ve cost us several thousand dollars yet we were able to leverage credit cards to get them for free or for pennies on the dollar. What?s even better is that we have earned these trips through our regular, everyday spending.

With that in mind, if you?re able to maintain that balance there really isn?t too much to fear. Yes, if you?re concerned about debt by all means churning credit cards should be the last thing on your mind. But, if it?s not then you can leverage your wise and planned spending to earn either cash back or free trips. You can start out slow and get a card that will allow you to hit the minimum spend rather simply.

For example, you could get the US Airways Mastercard that gives you 40,000 miles after the first spend.?If cash back is your thing you could always start out with something like the Chase Freedom or Discover it card to get you started. Essentially, if you?re interested in churning credit cards, dip your toes in the water with one card and see how it goes.

What are some other reasons you can think of not to churn credit cards? Do you churn credit cards ? why/why not? What was the first trip you got for free thanks to churning credit cards?

Photo courtesy of: Lending Memo

How to Start Investing on a Limited Budget

September 24, 2014 Wise Dollar Investing 7 comments

No matter how limited your budget might be, you should always try to find a way to put aside money for your future. I know it can be difficult to start investing on a limited budget, but it is possible ? you just have to find ways to do it and make it a priority.

I spoke with investors everyday who felt that they couldn?t start investing with little money and most often it came back to other choices they were making. Granted, some were truly strapped and had few options but that was not the case for the overwhelming majority.

The key to start investing on a limited budget, as it is with most things budgetary related is to look at where your money is going. For many that?s going to mean trying to find ways to save money here and there which will then add up to something you can put into an investment account once per month or quarter. With that in mind, there are two great ways to start investing on a limited budget I?ll cover below.

Start Investing on A Limited Budget Through Your 401k

We are in the day and age where companies are no longer providing us pensions and have replaced those with 401(k) plans. The beauty of the 401(k) is your money is taken right out of our paycheck before the tax is even paid on it. What that results in is lowering the amount of taxes coming out of your paycheck as it?s now being directed to your 401(k). I don?t know about you, but I?d much rather have that money in my retirement account as opposed to going to the IRS.

The common excuse I heard from many was they could not afford to put money in their 401(k). I understand that fear, but it can be done. If that?s not reason enough, many companies provide a match if you decide to invest ? which means they?re giving you free money. Is there any better? The match varies by company, of course, but this is a great way to get started investing on a limited budget as comes directly out of your paycheck and little other work is needed on your part.

Invest in a Roth IRA

If your company does not have a 401(k), this does not give you the excuse to throw up your hands and not start investing. There are many other options available to you and they come in the form of a Roth or Traditional IRA. Each of these has their own set of pros and cons and I?ll direct you to the IRS to see what those major differences are. There are going to be different tax implications with each so you?ll want to speak with a tax professional to see what might work best for you.

Personally speaking, I tend to go with a Roth IRA as the contributions made are after-tax contributions. What that means for you is that you get no tax benefit now, but when you withdraw at retirement those funds are withdrawn tax fee. That?s not too bad at all in my book.

Where Do You Invest

One of the biggest struggles I saw investors deal with was thinking that they couldn?t start investing with little money. That, thankfully, is a myth as many discount brokerages?allow you to open a retirement account for as little as $250 or nothing at all. If you don’t have $250 to start with then you can also set aside a certain amount each week or month until you hit that amount.

Assuming you do have something to start with, you can open an account with a brokerage like Motif Investing and begin saving for retirement for as little as $250. By starting out with that amount you can build it up to a more sizable amount over time while still putting something away for retirement. There are also many other options to consider, such as Scottrade, which is where I do most of our investing with. Scottrade allows you to open an IRA for as little as $500. That is a common entry requirement for many brokerages, as is $1,000.

Another option to keep in mind is if you need or want help managing your investments. It used to be that assistance was only available to those with a lot of money to invest. Thankfully the robo-advisor space changed that for investors with little money. Many robo-advisors, such as Wealthfront, allow you to start investing with as little as $500 and still get the benefits of professional management of your funds.

You might think it?s impossible to start investing on a limited budget, even with the different options available. While it can be difficult, it is most certainly possible. You can start by putting away $50 per month until you hit the amount needed to open a brokerage account and use it as a goal to drive you. You can also use funds from a side hustle to fund your investing. The point is there are options available to you if you?re wanting to start investing with little money.

What suggestions do you have for those wanting to start investing on a limited budget? How did you get started when you had little in terms of resources?

Photo courtesy of: Lending Memo

Dealing With Roadblocks to Debt Freedom

September 22, 2014 Wise Dollar Debt 22 comments

Good day, friends! Today is our next post in our series on how to make and keep a plan for successfully reaching debt freedom. Last time, we talked about making a?personalized plan?for your road to becoming debt free.

Today, we’ll talk about overcoming potential road blocks. A journey to debt free often takes at least one year, and often two to five years or more to reach.? Anyone who’s ever worked to reach a long-term goal knows that many bumps can crop up along the way to deter you from reaching that long-term goal, so today we’ll talk about how to overcome some of those road blocks and help make sure you cross the finish line to debt freedom.

Overconfidence in Your Debt Freedom Plan

Sometimes, when working a plan to become debt free, overconfidence can crop up and derail your payoff efforts. This overconfidence comes in thoughts such as “I’m doing GREAT! I’m in a much better place than I was six months ago, so it’s okay to charge a few hundred dollars and pick up that new TV. I’ll be able to pay it off quickly.”

If you’re working through your debt freedom plan and having thoughts like this come up, it’s time to remember the vital step of correcting your mindset regarding your debt and your plan. It’s time to remember that the right attitude is what will get you success and is just as important as the individual steps you’ll take to become debt free. The perspective has to be one of overcoming your debt,?not succumbing to it. If your goal is to become debt free, the debt has to become your enemy, not just a friend who you’re going to stop seeing for a bit.

Dealing With Debt Fatigue

When your debt-free journey is going to take awhile, it’s easy to get tired, emotionally, of dealing with the problem, even if you are making progress. Many people reach the point where they are sick and tired of making budgets, limiting spending and looking at spreadsheets, and they’re ready to dump the whole plan by the wayside. This is completely understandable: paying off debt?is hard work! So how does one combat debt fatigue?

First, remind yourself of the reasons you started this journey in the first place. Have a list of motivational “whys” close by so that you have the motivation to keep on going. Second, go to others for support, whether it be your spouse, a trusted friend, or like-minded people you find in the blogging world. Most of the people I know in real life have very little interest in discussing money and financial independence with me: they just don’t find it exciting, so the blogging world has been instrumental in helping me stick with our plan for debt freedom.

A third option for dealing with debt fatigue is to set up a reward system. Put little, inexpensive rewards in place for each milestone you reach toward debt freedom. Those milestones can be whatever motivates you: getting another thousand of debt paid off, sticking with your monthly budget, or completing a no-spend challenge – anything that works to help keep you motivated and on track. The goal is to make debt payoff more fun and thus, help to eliminate debt fatigue.

Letting Money Have too Much Power

This roadblock can also work to hinder your goal to reach debt freedom. On our own journey to debt freedom, I realized recently that I was letting money have so much power that I didn’t even want to spend $7.50 in gas to go see a free event with my family. We went, at my husband’s insistence, and had an absolute blast. That was when I realized that my eagerness to reach debt freedom was sucking the energy and the life right out of me. I had been giving money too much power and had forgotten that money is here to serve us, not the other way around.

Dealing with roadblocks on your way to achieving debt freedom is inevitable, but overcoming those roadblocks is possible with a little work, so don’t let those roadblocks hold you back from the wealth you know you can achieve.

What roadblocks have you encountered when working to reach long-term goals? What are your best tips for overcoming roadblocks? How do you overcome debt fatigue?

Photo courtesy of:?Jayel Aheram

Starting A Blog? Things to Consider

September 22, 2014 Wise Dollar Blogging No comments

I can?t remember where I saw the statistic, but there is something like two or three blogs started every minute. I?ll let you do the math, but suffice it to say, there are a lot of blogs out there. When I started my first site a little over two years ago I had no idea what went into starting a blog, just that it sounded like something I?d enjoy. Fast forward two years;?I’ve bought one blog and started another to add to my portfolio.

Depending on what goals you have for your blog, there can be a variety of things to consider. If you?re thinking about starting a blog hopefully these tips help.

Nothing Happens Overnight

If you think?you can start a blog and wait for money to?start falling from the heavens allow me to let you in on a secret ? it?s not going to happen. It takes time to build traffic, not to mention the fact there are millions of other blogs out there competing for the same eyeballs as you are. Understand that and it?ll help keep you in touch with reality. 🙂

With that out of the way, my first tip for starting a blog is determine what your goal is. Are you writing?a digital journal? Are you wanting to interact with other like-minded individuals online? Are you trying?to help others as you share your personal journey? There are many other things you can focus on as well, the point is to determine the purpose of your blog and why it exists. Combine that with developing your voice and you?ll have a good foundation.

Pick A Domain Name

It used to be that a great domain name was incredibly important. That?s not as much of a case anymore. Of course, if it?s a good name then it can help you stand out. Once you find a good domain name, there are a variety of sites where you can register your domain name?for relatively cheap. Regardless of the name you come up with, the point is that it?s not the most important thing when starting a blog. While it can tell readers a little about what your site is about, don?t vex over a site name.

Do Your Own Thing

With so many blogs on the internet it’s easy to get caught in the trap of comparing yourself to others. I get it, we all go through a peer pressure;?heck, I?do it myself at times. While comparison can be good to motivate you or even challenge you, make sure to stay true to your goals.

This is where the goals you have for your site become important. If it?s to grow your site then you?ll want to market yourself through things like commenting on other sites and being active on social media. Beyond that, you?ll want to focus primarily on content as that?ll be what brings readers back. Be yourself in your writing and let that come out. If you do that the rest will come in due time. Most importantly, remember that blogging is what you make of it ? so don’t forget to have fun!

Photo courtesy of: Owen W Brown

The First Steps to Getting Back on Track Financially

September 17, 2014 Wise Dollar Budgeting, Debt 7 comments

Many of us have been there. You?re up to your eyeballs in debt or you don?t know how you?re going to make ends meet come month end. Regardless of what the particular situation is, you?re wanting to get back on track financially but just don?t know where to start.

The first key, generally speaking, is not to panic ? while financial trouble can be stressful, it won?t stay that way forever if you?re committed to changing. If you put together a smart game plan and focus on making good decisions going forward, you will likely be able to get back on track and focus on positive growth.

One of the big keys to fixing your financial life is looking at it from a rational perspective, instead of an emotional one. Financial trouble can be a hard thing to deal with, but it?s most certainly not impossible to overcome. You have a certain amount of money that you bring in as income, and a certain amount you have to spend in expenses. Once you find a way to make the income outweigh the expenses, you can start to put your financial life back on track.

Get Back on Track By Assessing the Situation

In order to successfully get things back on track, you need to first know exactly what the problem is that you are dealing with. 🙂 ?Take some time to organize all of your financial records from the last few months, and see how they look. You can even ask yourself questions, such as:

What is the average amount of money you are spending on a monthly basis?
How much do you bring in each month?
What things can you cut without missing it?

One important element of this analysis is figuring out how much debt you currently have. By knowing where you stand in relation to debt, you can start to formulate a debt reduction plan for paying it off over time if that?s the issue you?re needing to address. By going through this exercise you can discern where you have the money that can be thrown at things like any credit card debt or putting towards savings. The key to remember is that even though it might be small amounts now, you want to develop that discipline of moving forward.

Building a Budget

Once you have taken an overview of the situation, the next step to getting back on track financially is establishing a budget. Your income is hopefully somewhat consistent from month to month depending on your salary, so you don?t need to think too much about that side of the equation.

When working on your budget, you want to revisit some places where you might be spending money unnecessarily and try to reduce those areas. There are many examples of this from cutting subscriptions or memberships you?re not using to reducing cell phone bills to cutting your grocery spending. The amounts might seem small on their own, but added up they can begin to build something substantial.

Establish an Emergency Fund

One of the most stressful things about living with financial trouble is that you feel like your back is always up against the wall because you have no reserve or savings to fall back on. When building your budget, try to account for a portion of your monthly spending to go into an emergency fund. You don?t necessarily need to have a particular purpose for this money, other than to sit in your account and act as a safety net in the event of something happening.

What I found that worked best when first establishing my first emergency fund was to give myself a goal. That first goal was $250 put away. Once I hit that goal, I didn?t stop, but doubled it to $500 and went on from there. The point is to give yourself something to shoot for that will motivate you to go reach it. It might feel that the money is just sitting there doing nothing. I get that, I felt that way as well at first. That?s the wrong view to take though. Emergencies happen and the last thing you want is to have something pop up that will throw you off track. Having that safety net will help protect against that.

What are some suggestions you?d give to someone trying to get back on track financially? What is the first thing you?d cut? What kept you motivated when you faced financial trouble?

Photo courtesy of: Les Chatfield

*This post was featured on Penny Thots and Loans & Lifestyle

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